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What is asset finance?
Asset finance is a type of finance that allows businesses to buy physical assets or refinance existing physical assets.
Whether your business is looking to purchase new machinery, improve its fleet or upgrade its IT systems, asset finance is a way to fund any essential physical item. Since asset finance is a type of secured loan, there are many options when it comes to this type of product.
At Teito, our team of experts have many years of experience in helping businesses access the right finance. We help secure funding for all size of business, get in touch today to learn more.
What types of asset finance are there?
The term asset finance covers various funding options, which are outlined below.
Hire purchase
Hire purchase allows you to spread the cost of acquisition of an asset over a set amount of time. Monthly payments are made, and at the end of the agreed period, the business takes over ownership of the asset. The business is responsible for the maintenance of the asset, including any repairs that may be required. With a hire purchase agreement, the asset will be listed on your balance sheet from the outset.
Equipment leasing
With equipment leasing, the lender acquires the asset, and you make monthly payments to them to lease the item for a set period of time. Unlike hire purchase, the responsibilities of ownership are generally with the lender, such as maintenance and repair activity. The asset does not sit on your balance sheet, and payments are taken off as an operating expense.
Once the agreed term has ended, there are a few options. You may decide to:
- Extend the lease on the asset.
- Upgrade the asset to a newer model.
- Pay the balance and buy the asset.
- Return to the lender.
Finance and capital leases
Finance or capital leases blend elements of hire purchase and equipment leasing. With these finance products, the asset does not sit on your balance sheet, and monthly payments are classed as an operating expense. You continue to make monthly payments, generally for the useful life of the asset rather than a handful of years.
Asset refinance
Refinancing existing assets owned by the business can provide a cash injection or consolidate debt.
What are the advantages of asset finance?
There are many benefits to asset finance that you may consider when making financing decisions for your business.
Even if your company has the cash to purchase an essential asset outright, it may make more commercial sense to opt for asset financing. Asset finance can provide funding to accelerate growth, for example, enabling fleet expansion for a delivery company. Refinancing owned assets can also help to free up cash for other purposes.
Are there any drawbacks of asset finance?
With asset finance, you may find that you pay more over time than you would if you were to buy the asset outright.
Apply for asset finance now
If you're considering financing options for your business, get in touch with our team of expert advisors to learn more about how Teito can help you.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
